Neurocrine Biosciences Inc (NBIX) 2008 Q1 法說會逐字稿

Welcome to today's teleconference. At this time, all participants are in a listen-only mode. Later there will be an opportunity to ask questions during our Q&A session. And as a reminder, this call may be recorded and I would now like to turn the program over to Mr. Kevin Gorman. Please go ahead.

Thank you, very much, and welcome to our first quarter conference call. I am joined today with Tim Coughlin, our CFO; Dr. Chris O'Brien, our Chief Medical Officer; and Claudia Woodworth, in charge of Investor Relations. On the call today, Tim is going to take you through our Q1 financials, and Chris will give you an update on the GnRH clinical program, Urocortin 2 and CRF. Before we start I would like Claudia, could you please read our Safe Harbor statement.

Sure. Good afternoon. I want to remind of Neurocrine Safe Harbor cautions. Certain statements made in the course of this conference call that state the Company's or Managements intentions, hopes, beliefs expectations or predictions of the future are forward-looking statements which are subject to risks and uncertainties. Information concerning factors that could cause actual results to differ materially from those contained in or implied by the forward-looking statements is contained in the Company's SEC filing, including but not limited to the Company's annual report on Form 10-K and the quarterly reports on Form 10-Q. Copies of these filings may be obtained by visiting Investor Relations page on the Company's website at www.Neurocrine.com. Any forward-looking statements are made only as of today's date, and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

Thank you, Claudia. Tim, I'll turn it over to you.

Thanks, Kevin. For the first quarter 2008, we had a loss of $21 million or $0.55 per share. Compared to a loss of 25.7 million or $0.68 per share in the first quarter of 2007. The difference being primarily driven by savings realized as a result of our severance program in the fourth quarter of 2007. During the first quarter of 2008, we had revenue of 1.7 million, we received a $1 million milestone on our CRF collaboration with GSK for moving a third distinct compound from the lab to into the clinic. Additionally, we recognized 700,000 under our DSP collaboration for indiplon. Research and development expenses decreased from 19.1 million in 2007 to 14.2 million, primarily the result of our 2007 severance program. Additionally we had overall lower external development costs.

General and administrative expenses remained flat from period to period. From the first quarter of 2008, we recognized 2.2 million in severance expense. This severance cost was completely offset by a decrease in general and administrative expenses, but were a direct result of our severance program enacted in the fourth quarter of 2007. Interest expense increased from period to period. Recall that during the fourth quarter of 2007 we sold and leased back our headquarters. Under Generally Accepted Accounting Principals our rent payments will be treated as interest expense for a period of time, post this transaction, hence the resulting increase in interest expense. Our guidance for 2008 is reaffirmed at a loss of 75 to 80 million for the year or $1.95 to $2.08 per share based on 38.5 million shares outstanding. Our nine cash expenditures will approximate 17 million, and our non-cash revenue will approximate 3 million. Our cash burn from ongoing operations will approximate 65 to 70 million, and prior to including the impact of any out license activities, we expect to end 2008 with at least 100 million in cash and investments.

With that I'll tun it back over to Kevin.

Thanks, Tim, and I would like to turn it over to Chris O'Brien right now to take us through our R&D program.

Thanks, Kevin. So I'm happy to talk about the intense amount of activity that's currently underway with the GnRH program and then some additional updates on the other programs. As we have discussed in the prior conference call, the focus of the GnRH clinical team right now are on the three Phase II trials that are currently underway. The one 603 trial that is primarily focused on giving us information about changes in low minimal density after six months of treatment was fully enrolled in December of 2007, and we anticipate the last subject to have their week 24 visit sometime in June. There's obviously some flexibility in these trials based on scheduling and when the DXA scan occurs. Once that occurs we proceed with data collection and QC and anticipate top-line results in bone mineral density in September. The study that was started this winter with an investigator meeting in January is the so-called 702 study, also known at the Lilac Petal Study. And this trial is a very important trial for us, in that it -- it is planning on enrolling 150 women with moderate severity endometriosis. And most importantly, it incorporates for the first time modification of the clinical end points as recommended to us by the repro division at the FDA. So we'll have a chance to test their recommended assessment method. We are including a higher dose than we've used before, a 250-milligram dose in addition to the already soon to be effective 150-milligram dose. And we are taking advantage of recommendations from the NIH, and the American Society of Reproductive Medicine Guidance on endometriosis trial designs and we're including a placebo single-blind wash-in period, this should help counter balance, if you will, the placebo effect that we and other companies in trials have seen in endometriosis trials. This trial is intensely active right now with 50 study sites up and running in the U.S., and we anticipate enrolling the last patient late Summer, and then top-line readout of efficacy results with the new scales, the higher dose, the commercially viable tablet formulation, all in the first half of 2009.

Now most recently and the focus of a lot of work on the team's part right now is the so-called 703 study. This is a trial that is currently getting up and running in central Eastern Europe. And this is an important trial in that in addition to employing the higher dose, the 250-milligram in addition to the 150-milligram dose, we are including a leupron or leuprolide depo injection as well as placebo in this trial. For several reasons. One, we need some ex-U.S. experience as the regulatory and clinical operations aspect of studies are different in this environment, two, the enrollment capacity is much more rapid; that is the recruitment and enrollment of subjects in these trials typically is more rapid in central Eastern Europe than it is here in the U.S.; and thirdly, we are very interested in getting a -- some statistical information about the difference between Leuprolide and placebo to the extent that we expect at least in European registration trials that we will be carrying out a non-inferiority trail design in pivotal phase of this development program, and to do a proper non-inferiority trial, you have to have adequate statistical understanding of the margin of your active comparator. So very useful trials, all put in place, 603, 702, and 703 to give us the set of data that we need to go into a end of Phase II meeting in 2009, and work out with the FDA exactly what it is we need for successful pivotal trial program. So to far we're very happy with the way these three studies are enrolling. The performance of our clinical sites, the read, as it were in terms of safety signals or lack thereof of the three trial, and we anticipate being able to take this data into our end of Phase II meeting next year.

As you know, we have also completed a two-week trial in healthy male volunteers with elagolix, and this is the foundation for subsequent BPH trials when we decide to apply the resources to that. So the GnRH program is in good shape, we're moving forward and happy with the status. As you know we have two other Phase II programs. The CRF R1 antagonist program is our collaborative partnership that started some years back with GSK and the discovery group here at Neurocrine working in conjunction with the scientists and team at GSK have put forward now three compounds into the clinic, and those compounds are known in the shorthand at the 008 compound, the 679 compound, and most recently the 529 compound, which has entered into a Phase I single ascending dose trial. So the 008 compound was the first out of the gate. That compound was put into both IBS, irritable bowel syndrome, and special anxiety disorder Phase II clinical trial designs, as we have previously reported, the social anxiety trial failed to show a difference between 008 and placebo. The IBS trial is ongoing, and we expect a data readout toward the end of this year.

The -- just as a reminder, these -- all of these clinical programs are conducted by GSK. The 679 trial is slated for major depression trial beginning sometime midyear this year, and represents, I think, the extent of the commitment that GSK has had to this CRF program. And finally, the 529 program I mentioned is now in Phase I. These latter two compounds reflect kind of unique chemistry and pharmacology and a significant commitment of GSK to this target. The third Phase II program, is our, also a CRF target, in this case the peptide agonist to R2 receptor on a prominent miocardia and the Urocortin 2 program as you know has completed some small Phase II trials and stables, CHF patients, congestive heart failure patients, with initially a one-hour infusion and subsequently up to four-hour infusions in these subjects. Those studies give us a good hemodynamic signal that we were increasing cardiac output having the expected effect on blood pressure and I know a major safety concerns.

So the next step to that program would be to engage in longer duration infusion in other target populations, such as those with acute decompensate heart failure, so called ADHF patients, and to support this longer-duration infusion, we need adequate preclinical data to that, as I have reported in the prior call, we had uncovered a -- a technical problem with our ability to infuse high enough doses at high enough concentrations in to animals for a continuous two-week infusion. The preclinical team at Neurocrine here has worked intensely to develop a solution to this infusion physical chemical problem, and it appears that they have been successful in that effort, and a variety of preclinical studies are currently underway. These multiple preclinical trials will read out at various time points this year, and with successful conclusion of the preclinical studies, we would be in position to advance into these longer duration fusion trials in patients. And then finally, our other late-phase program that is indiplon, as we have previously been given guidance, we have had an FDA meeting scheduled for earlier this year. The FDA has rescheduled that meeting for July of 2008, and we look forward to the opportunity of sitting down with the neurology division and FDA Senior Management, and as soon as we can work out a path forward to address the three issues that they have put in their December 2007 approvable letter. So I think in the time I have been given we tried to cover the activities of the GnRH program, the CRF partnership with GSK, the Urocortin program and the indiplon situation with the FDA.

And with that I'll turn it back to Kevin. Thank you very much, Chris. Just to add a little bit nor to the color of the FDA rescheduled our meeting at the last minute due to unfortunate questioning conflicts that they had there. We were prepared and have been fully prepared to meet with the FDA. We were prepared and have been fully prepared to meet with the FDA, they have all the documentation and the entire premium package that is required of us there. What I would like to do right now is to address the current status of our partnering program with GnRH. As stated previously, we have been and we continue to be in various stages of contract negotiations with multiple large pharma partners, in additionally we have new parties that have expressed interest in the program. Going forward, it will not be our practice to speculate on a time line to complete this deal. This does not serve the program's interest in our negotiation. The parties that we're speaking with are satisfied with the program and its current data set. The elagolix program is our stronger asset and we do not want to complete a deal simple for the sake of doing a deal. We have a track here at Neurocrine and very good strategic partnerships, and we are going to continue with that track record with a partnership in this program area. We want a partner that will fully exploit this asset, and a partner with a shared vision for this program.

Now, as you heard from Chris, the program continues to mature nicely, with three Phase II trails up and running. We have treated approximately 500 patients with elagolix without any serious AEs, our biomarkers, estradiol, and to peptide in addition to pain scores continue to show efficacy and safety. Our intellectual property positions, the preclinical work, our manufacturing and commercial formulation processes are all in excellent shape. This program is our most valuable asset, and we will continue to prioritize and invest in this asset. And that brings us to our cash burn standpoint that Tim had touched upon. We will manage the Company's cash balance and keep our burn to maintain a minimum of 18 to 24 months of operating cash at all times. We are intensely monitoring and prioritizing our expenses throughout the Company with the primary focus on our GnRH program, and then the balance of our pipeline.

We're going to now turn our attention for the rest of this year, we're going to focus on completing the elagolix clinical work ahead of us, and build even more value in the program while we continue to discuss and negotiation with the various parties. But, again, we will not provide specific guidance on the actual timing of the signing of the deal. Giving time lines gives no advantage to the program or the Company.. And in my experience it can only give leverage to the parties on the other side of the table. I remain quite confident that a significant deal with the right partner at the right time with be consummated as I stated earlier this year. Now with that, I would like to open up to questions.

Thank you. (OPERATOR INSTRUCTIONS). We'll take our first question from the site of Brian Abrahams from Oppenheimer. Please go ahead.

Congratulations on getting 703 underway. Just a question on the DXA data, I'm wondering what results from the six month DXA scans would one look for such that you would not necessarily need to do long-term bone loss studies? I'm just wondering if there's kind of degrees of variability that are allowable or if there's a certain window around the difference from baseline?

Right. Thanks, Brian. That's a really important question. Two points, if I may. The most important thing we get out of this 603 study is for the first time we get to link all of these moving pieces. So we have drug exposure. We have estradiol levels, we have C-telopeptide which is the biomarker for bone resorption and DXA. So with all of those we can have a good understanding of what happens to population of women with these things, and we can model and argue, we hope, to the FDA, that with the expected range of clinical response at a clinically useful dose that DXA scans are not needed long-term based on the mechanism of action. To your point of how much change is too much, there is no document from the FDA that says, here is the line in the sand. This is something that always comes down to, after you submit your NDA and label discussions about -- is there a black box, is there not? And what kind of warnings or restrictions and prescribing information, et cetera? And so what we have had is discussions with them to date about what they would consider clinically meaningful, but they will not commit to hears a specific amount. Now to put that in context, we know that with the drug like Leuprolide depo, that at six months -- after six months of treatment you get anywhere from 5 to 7% bone loss if you don't use add back, and then even if you stop treatment right then and there, the bone loss continues to mount for months after treatment. For our program we know within days of discontinuation of elagolix, estradial starts to come back up, and we would not anticipate any delayed (inaudible) from this therapy, so it's that point -- even if there is a little bone loss, which we don't expect, but even if they were, you wouldn't need a pivotal program that required 6, 12, 24-months of follow up DXA. So we hope we can negotiate our way out of these long-term follow-up studies.

Great. Makes sense. One quick follow-up. Is your plan to move in to Phase III with the six-month DXA data from study 603, plus 3 months efficacy data from 702 and 703, or are you planning to wait until you have the six-month DXA data from 702 and 703 before starting a pivotal program? Thanks.

That's a good question also. The plan is to go to the end of Phase II meeting with the six month DXA data from 603, and the three-month data from 702 and 703. Obviously the end of Phase II meeting, how that discussion goes depends on what the data looks like. And our best case scenario is shortly after the end of Phase II meeting, we would be in a position to begin the pivotal trial later in 2009, but, again, I know what the FDA wants depending on what the data shows will dictate those time lines.

Thanks for the added information.

We'll take our next question from the site of Sapna Srivastava. Please go ahead.

Hi, I just have a quick housekeeping question. What was the options expense in this quarter?

Option expense for the quarter is -- it's 2.2 million.

And how does it trade between R&D and SG&A?

Give me one second, as I find it in here. I think it's 1.3 and 0.9, so 1.3 G&A, 0.9 R&D.

Okay. And one more quick question regarding the interest, sort of the rent on the [season d] transaction. How should we go about modeling that in the coming quarters?

That number should be pretty flat to six, so if you take the interest expense and just take that straight line out, you'll be probability close. We probable have about 400,000 of interest, little less in there related to some equipment loans we have that will be going out at the end of this year, but if you want to call me, which can walk you through how the accounting works, but if you take this quarter's number and kind of flat line it, you should be pretty darn close.

Okay. Great. Thank you so much.

Sure.

We'll take our next question from the site of Eun Yang, please go ahead, from Jefferies.

Thanks, very much. Question on the CRF -- (inaudible - highly accented) program with Galaxo, the program has been going on for sometime, and it seems to me that the program never goes -- hasn't really gone beyond larger Phase II study, and yet Galaxo is coming up with more backup compound. Are there some characteristics that Galaxo or you would like to see before moving in to a later stage of development?

Well that's an interesting question. Let me see if I have captured what you are trying to get at. You are correct that there have -- there is a large commitment to this target, the CRF receptor and the R1 antagonist, and Galaxo has systematically moved these three compounds through development in a fairly classical fashion, so the 008 compound was the further along, had the most support, so it got in to clinic first, went through the usual Phase I, and then Galaxo put the 008 compound into -- it's a standard model that they use for affective disorders, the social anxiety, and then because of some really quite striking preclinical model data for irritable bowel syndrome invested in the IBS program. As you heard earlier this year, the social anxiety because that didn't have a successful outcome for 008, the -- that arm of this investment was truncated. The IBS arm will continue to play out until we get a signal, good or bad. Following that, the next compound, 679 was close behind 008, and therefore, now is going, and GSK actually did have -- does have data through its collaboration and other efforts that they made a judgment call that this would be the appropriate follow on compound to take correctly in to major depressive disorder, so that's the investment -- going -- so it's actually moving along quite nicely in terms of timing, and of fairly typical time lines for that, and then 529 is a -- a backup to 679 in case anything comes up there.

Are there any other companies actually developing products for effective disorder and IBS for this target?

So for affective disorder, yes, BMS has a program, and Ono Pharmaceuticals both have R1 antagonist programs currently in mid-stage development. I'm not aware right offhand about IBS, but I can -- I can check on that.

Okay. And then lastly, the -- last time you guys guided that a selective (inaudible - highly accented) uptake inhibitor is kind of on hold, is it the ongoing status for that program?

Yes, as you recall that decision was made as kind of a portfolio review, and given our resources and the number of people we have here, I wanted my entire team devoted to the GnRH program, so that's just -- that's just on the shelf.

Okay. Thanks very much.

Thank you. Once again, if you would like to ask a question. (OPERATOR INSTRUCTIONS) We'll take our next question from the site of Elizabeth Naldey from Piper Jaffray. Please go ahead.

Thanks for taking my call. If you could just talk a little bit about how the FDA scale for endometriosis symptoms differs from how you are measuring it in your first Phase II study.

Sure, they have given guidance not only to Neurocrine but to several companies who are interested in women's health. That they very much are interested in the two primary systems of women suffering from endometriosis, namely, dysmenorrhea, that is pain associated with menses, and non-menstrual pelvic pain. And historically as you know, the primary scale that has been used for approval of drugs like Leuprolide or Depo Provera for this indication has been the B&B scale, which in our early development program, we called the composite pelvic signs and symptoms scale or the CPSSS. There have been several versions of this. So the agency told us and others that they liked the B&B because it was historically important and they considered it a validated scale, but this scale was a once-a-month questionnaire done paper and pencil with three components based on the reports of the subject, and two component scored based on the investigator's findings on pelvic exam. So those five subcomponents were used. And the FDA told us they wanted us to use two of those components, because they had this link to what was historically useful, namely dysmenorrhea and non-menstrual pelvic pain. But they wanted -- but they really liked the data that we had shown them from our early Phase II studies, using electronic diaries , which were used to capture daily pain rating, and daily vaginal bleeding assessments by the subjects.

So they said why don't you modify the B&B, give us electronic diary information daily on dysmenorrhea, non-0menstral pelvic pain, and vaginal bleeding, and oh, by the way, we would also like you to update the language. It was somewhat archaic and they wanted us to modify it. And they give us suggestions -- a recommendation of how they wanted their language to work. So we took their recommendations and built that in to the trials, the primary end points.

Now in addition to that, you may be aware that about a year and a half ago there was a consensus meeting sponsored by the NIH, and the ASRM, the American Society of Reproductive Medicine and they came out with their recommendations on endometriosis trials, particularly as it relates to assessment of pain and related systems, and they recommended that a zero through 10 numeric rating scale be used for pelvic pain, much like is done in most other therapeutic classes that assess pain, an NRS scale is the commonly used acronym. So we also have this NRS scale in and this will -- has replaced the VAS that was used in the early Phase II studies, so we'll be able to pull this information together in addition to continuing to use the validated endometriosis health profile measure as three ways of getting at the symptoms of

Okay. Well I want to thank you very much. These have been excellent questions. I think that with what Chris has presented to you, and with the depth of your questions that you see the strength of this program, and we continue to make very good progress in focusing on our key strengths and moving all of our programs forward. While the size of this company has decreased, the commitment and scope of our mission remains quite strong. I look forward to meeting with you in the next few weeks, and I would like to thank you again for your time. Good-bye.

This does conclude today's teleconference. You may disconnect at anytime, and have a great day.